Wt Wti Crude 2x Discussion Threads

[andrewbaker] 09/1/2009 17:18

If you want to play an oil price rise, use CRUD: don't use LOIL 'cos due to the leveredge you lose more on the dips and don't get back to par when the oil price does (see previous posts 66, 67 and 69 for examples). Even with CRUD, you lose on contango when the current future expires and is rolled over to the next month. To reduce the effect of contango, use a forward contract (eg: forward petroleum) as these buy three months forward and roll over further out where the effect of contango is less.

[999pete] 09/1/2009 17:00

If you're prepared to wait it out and add on the dips I dont really see how you can lose on this in the medium to long term (even with currency fluctuations). I get the impression not many people see this as a long-term play however, preferring to day-trade the dips and rallies along with SOIL.
Personally I'd be delighted to see it return to $70 in the medium term (which would seem to be the break-even price for the producers). Its a huge payday from these levels.

[rbcrbc] 09/1/2009 16:52

Rising hopes that the Israel/Gaza situation might end without others getting involved will also be bringing downward pressure on poo. I can see poo back to $35 before starting the uptrend again. (I am currently in SOIL)

[andrewbaker] 09/1/2009 16:35

The economic situation worldwide is far worse than any politician and most business pundits want to admit to (if they know, that is.) Cutting oil production isn't going to do much if what is produced can't be sold anyway. Add to this all the oil sloshing around in tankers at sea 'cos there's nowhere else for it at the mo, and it's easy to see why the US jobs data pushed the price back under $40.

Yes, the price will rise sometime, but not soon, IMHO.

[jonwig] 09/1/2009 15:25

US jobs data were flagged up as key, and have sent UK and US markets down.
Oil had to move in line.

[bobby.ifa] 09/1/2009 15:24

Does anyone know why this has dropped so much?

[jonwig] 09/1/2009 15:12

guidfarr - since PoO is oil-denominated, it tends to move with the US$ rates ($ falls, PoO rises, sort-of) so you can't hide.

I sold my LOIL this morning, as I wanted to show some profit, though I can't quite bring myself to go short.

[guidfarr] 09/1/2009 14:26

well that is a bit of a problem are there any ETFs that follow the oil price out there are denominated in sterling... sterling is already low at it is... and i'm expecting the dollar only to get lower with uncle sam having a no-ending supply of dollars (it seems the printing press is always on over-gear these days!)

[jonwig] 09/1/2009 07:42

guidfarr - there's a link in the header (first line) to the website for LOIL description.

On your other point, LOIL is US$-denominated. When I bought I was quoted a £ price based on the exchange rate at the time.
If there is no change in the (US$) price of LOIL but the £ drops, I can sell for more than I paid (converted to £)and vice-versa.
Hence LOIL is 'short sterling'.

Does that answer your query?

On the PoO itself, I'm a bit surprised it's held up - I expected a drop back below $40.
US employment numbers today I think - could be crucial for next move.

Latest:

[guidfarr] 08/1/2009 21:52

so LOIL i trust is leveraged oil - is this a tracker of oil X 2?

is it denominated in sterling? all my money is in sterling so I would like to find a tracker denominated in sterling

someone stated
"BJED Buying ETFS priced in US dollars is surely short sterling, long dollar: if the £ drops against the $, the return increases in sterling terms and vice versa. (Buying the pound quoted security makes no difference as the price adjusts to the $/£ exchange rate anyway.)"

what do you mean by this statement if I may ask?: (Buying the pound quoted security makes no difference as the price adjusts to the $/£ exchange rate anyway.)

[rbcrbc] 08/1/2009 19:07

I switched to SOIL yesterday, and dont see myself coming back this week. POO will dip further when the Israel peace deal comes out imminently. IMHO

[bobby.ifa] 08/1/2009 17:11

Ouch, below my entry price of 5.95, could have got out at 8.35 on Monday! Doh!

[andrewbaker] 08/1/2009 16:45

I'm still in SOIL as I do not see the oil price going up sustainably anytime soon. LOIL is good when it does, and can be very good daytrading, but it hurts when the price is falling: it's not for me yet.

[999pete] 08/1/2009 15:45

In for a nibble. Expect it might still retrace a bit from here but dont want to miss the surge when it comes.

[bobby.ifa] 07/1/2009 17:41

Yes, it is.

[tricky1992000] 07/1/2009 17:10

does anybody know if loil is isable?

[andrewbaker] 07/1/2009 12:15

machoolahan- Good observations. I'm torn at the mo between day, short-term and long(er) term trading. Hence my thoughts of staying in SOIL for the longer term, whilst playing with LOIL. However, I agree, I've waited too long; so I haven't gone with LOIL: the market did what it did without me! lol. I've also noted well recently that the spreads, particularly at times of high volatility, are very much in the market makers' favour, which has put me off the very short term trading I was doing. As the vast majority of my trading is in an ISA so I use ETF a lot, I've got my broker down to 0.5% on trades, but even then, the cost of going long-short-long with dealing and spread is high. Maybe I ought to look into spread betting or similar.
........................................

Just became aware of a potentially useful correlation between the price of crude oil and AIGA/SAGR: all the softs in the index used for these ETF are also used to produce ethanol, including coffee grounds! So, as the price of crude rises, and it becomes more financially worthwhile to make biofuels, the cost of these softs should rise too.

Now, is the recent rise in the trend of AIGA due to the oil price rise, or would it have happened anyway. Accidentally I could have been using AIGA as a hedge to my short oil position since Christmas. If oil falls going forward - which I'm betting on - and AIGA continues too rise because of the food aspect, it's win win.

What needs to be considered right now is the annual commodity re-balancing of the AIG indices, which will affect prices. Copper, for example, has risen recently as it is likely to form a bigger part of the index this year; but it is likely to fall back after the rebalancing, which takes place between 9 and 15 Jan.

[machoolahan] 07/1/2009 01:48

Andrew m8 - you're talking like a man "caught short" there - switching to match the market after the market has already done its worst. Personally I still think short is a good way to go, rather than changing your mind based on an (agreed) momentum as the tide laps your toes.

Collar trades (as you discuss) ultimately resolve into the overall market minus dealing charges and you might as well just email your broker the charges and sit on the sidelines. Unless it's a Madoff style scheme in which case email the broker a beermat and go to sleep on your yacht - whichever suits.

The problem with momentum is that it's actually fairly random. Unlike fundamentals - which as the oil market shows $145 -> $35 -> $50 in 6 months are ermmm... random. The fundamentals have nothing to do with last year this I'm pretty satisfied (and I'd like any "opponent" to explain how, otherwise).

It's certainly a shocking observation. But given a 100% rise followed by a 75% fall, for a commodity the "real" world uses (e.g real US consumption down a whopping %3 year-on-year - ahh OK) it's undeniable. For the most useable, tradeable commodity we have it's a pretty screwed market.

BUT.....

For now the "sub-game" seems to be - watch the DOW - although oil ticked down more than the DOW ticked "up" at the end, I suspect, on the realisation that Israel's bombing of a school may "shorten the war in the Middle East".

And of course if the DOW goes up much further all of us will have the pleasure of never listening to any analyst or minister again - this curent slump being the usual market "swings", swallowed by the usual market-post-hoc blow-hard renta-dribble analysts. Or not.

In summary - if it's a proper recession I supspect the POO will decline again. If it isn't - then we're just living through the market's occasional "ill patch". But I think it's a recession. The newspapars are certainly, utterly, desparate to tell me it is so.

[bobby.ifa] 06/1/2009 22:16

Nicholas Brooks of E secuirities gave a great web cdnfrence today about Oil prospects-take a look at their website to get the opinion. Quite bullish for the long arguement.

[andrewbaker] 06/1/2009 18:14

jonwig - Good post: there is definitely far more upside than downside potential.

I'm thinking maybe take a position in LOIL whilst retaining SOIL, selling as appropriate. A trending market could make this profitable on both sides, and the emphasis would be long given the LOIL leveredge (and I'm beginning to think long is the trend going forward). Comments please.

[jonwig] 06/1/2009 11:13

AB - I suppose it's what you'd call a pivotal moment!

The supply floating around in oil tankers isn't unlimited, and are there any more available at a cheap rate which would make storage worthwhile?

Just about everyone is agreed that PoO will rise, and unless you're in touch on a daily basis (for trading, which I'm not), the potential upside exceeds the potential downside.

[andrewbaker] 06/1/2009 11:02

How much is due to current worries, eg Gaza et al? Will OPEC reduce production, and will it affect prices if demand is low? How much will China buy now, and what will happen to prices if/when they stop/slow down? What about the supply floating around in oil tankers? Help! Maybe best go with the charts: yes, could be an uptrend starting. Everyone has to decide for themselves.

[relishing] 05/1/2009 19:26

I may be mistaken, but it seems to me that oil has broken out of its downtrend.

[andrewbaker] 05/1/2009 15:42

-bobby.ifa

I'm a tad annoyed with myself for not short term trading LOIL, but don't believe that this price increase will prevail very long. I may get in if the price drops back a bit and things still look bad re Israel/Gaza. Longer term I'm staying in SOIL, and yes, interest rates dropping (by 50 basis points?) on Thursday will make the right oil play combined with the $/£ forex rate look very attractive. Which way oil on Thursday though?!

-jonwig

Interesting. I feel that the price will go into uptrend sometime: just don't know when! I do think now though is premature. My overall view is that we are in a very bad recession/depression and are a long way from any upturn.

[jonwig] 05/1/2009 15:11

Fairly comprehensive summary of where we're at with PoO, though bears will judge it biased, maybe?